Which one of the following provides a valid economic justification for government intervention in a free market?
The free-rider problem leads to an oversupply of public goods by private firms.
Consumers have perfect information about the long-term consequences of consuming merit goods.
The social costs of producing some goods exceed the private costs, leading to overproduction.
Monopolistic markets always achieve allocative efficiency due to high barriers to entry.
378 exam-style questions on AQA A Level Economics 1.8 The market mechanism, market failure and government intervention in markets, covering 1.8.1 How markets and prices allocate resources, 1.8.2 The meaning of market failure, 1.8.3 Public goods, private goods and quasi-public goods, 1.8.4 Positive and negative externalities in consumption and production, 1.8.5 Merit and demerit goods, 1.8.6 Market imperfections, 1.8.7 Competition policy (A-level only), 1.8.8 Public ownership, privatisation, regulation and deregulation of markets (A-level only), 1.8.9 Government intervention in markets, and 1.8.10 Government failure. Each one has a worked solution and a mark scheme showing where the marks go.